Federal court gives Medicare patients a new right to challenge denials of coverage

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HARTFORD, Conn. — A federal judge has delivered a sweeping health care victory to senior citizens by giving hundreds of thousands of Medicare beneficiaries a right to challenge denial of benefit decisions that for years have left elderly patients struggling under crushing medical bills.

U.S. District Judge Michael P. Shea’s ruling followed nine years of litigation in a class action brought by Medicare patients around the country whose benefits were cut when hospital review boards, pressed by federal regulators, made unappealable decisions that switched hospitalization their status from “admitted” to under “observation.”

For patients entering the hospital this switch to observation status can be financially catastrophic. For example, in the past patients covered by only the free version of Medicare Part A have been personally responsible for costs of hospitalization and follow-up care or rehabilitation in a nursing home — costs that routinely reach into tens or hundreds of thousands of dollars.

The decision applies only to Medicare Part A patients. Those with Part B or other supplemental insurance have coverage regardless of in-hospital status.

Under Medicare rules, Part A beneficiaries had no right or means to challenge a change in status, which elderly patients sometimes were not aware of until they received bills. Shea said the lack of a challenge mechanism was a violation of patient due process rights and he ordered the U.S. Department of Health and Human Services, which administers Medicare, to create one.

Shea’s ruling covers benefit denials dating from 2009 and going forward.

“I think it’s very safe to say that there are hundreds of thousands of beneficiaries since 2009 who will now have this right,” said Alice Bers, of the nonprofit Center for Medicare Advocacy in Willimantic. “We really like that the court realized that his is about fairness.”

Bers and other lawyers for nonprofit Center for Medicare Advocacy sued Health and Human Services in 2009, along with the National Senior Citizens Law Center. Officials at the Department of Justice, which defended the suit, were not immediately available.

Shea’s compelling, 114-page ruling distills enormously complex Medicare rules and relates actual experiences of elderly patients to illustrate how the system does — or doesn’t — work.

“An elderly person’s arrival at a hospital is a stressful moment,” the decision says. “The person might arrive in an ambulance. He or she might be in pain, suffering shortness of breath, or showing other troubling symptoms. Worried family members might wonder if their sick parent or grandparent will ever see the outside world again once he or she passes through the hospital’s doors. One question that might not be uppermost in their minds at that moment — but that may soon emerge to add to the stress of the experience — is who will pay for the elderly person’s medical care.”

“If the patient is placed on ‘observation status’ instead of being admitted as an inpatient, the patient will have to pay for both the hospital services and the post-hospital skilled nursing services out of pocket …,” the decision says

The right of appeal that Shea’s decision establishes applies to Medicare Part A patients who are admitted to a hospital, classified by an attending physician as “admitted,” and later reclassified by a hospital Utilization Review Team as under “observation status.” Patients who undergo surgery, are hospitalized for a week and later discharged to skilled nursing care can be reclassified from admitted to observation by review teams created to ensure compliance with the Byzantine Medicare rules and regulations.

One of the class action plaintiffs, Ervin Kanefsky, was hospitalized for five days after breaking his shoulder, according to the decision. Shortly before discharge, a hospital officer told him that “the powers that be changed you back … from inpatient to observation so they’re not going to pay for your rehab.”

Kanefsky said his treating physician was present, was “aghast,” and exclaimed “What? … I put this man as an inpatient.”

Kanefsky asked whether his treating physician could do anything about the status change and was told the physician could not.

Another of the class action plaintiffs, Andrew Roney, was hospitalized for three nights. He was admitted as an inpatient, but prior to discharge his status was changed to observation. Roney said he received a notice that read, “Your stay is being classified for billing purposes as ‘Observation’ stay, rather than as inpatient admission … Assigning a classification for billing purposes is required by your insurance. Please note, however, that the quality of care is exactly the same regardless of whether your stay is billed as observation or inpatient.”

Bers said one of the class action plaintiffs pleaded with a member of Congress – without success — to challenge a change of status and the ensuing medical bills.

Shea said that the class members demonstrated that the government had denied them their “property interest” in their Medicare Part A plans and that doing so without an opportunity to appeal is unjust.

“Just as the Secretary (of Health and Human Services) cannot deprive these beneficiaries of Part A coverage directly without affording them the procedural protections to which the Constitution entitles them, the Secretary cannot do so indirectly, through a hospital’s utilization review process,” Shea wrote. “These class members must be afforded some means to challenge the decision that effectively stripped them of their property interest in Part A benefits.”

The decision orders the government to set up an appeals process.


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